2010 (12) TMI 303 - AT - Customs

Demand - Search and Seizure - Classification - Confiscation - Misdeclaration of quantity and value - Manipulation of invoices - The transaction value of goods covered by Bill of Entry No.436656 had to be determined by resorting to Valuation Rules covering import of identical or comparable goods - There was no evidence other than the statements of Shri Velu Chandrasekar for mis-declaration or under valuation in respect of imports made under the past Bill of Entry No.320364 dt. 20/5/2002, No.394234 dt. 12/12/2002 and No.416047 dt. 10/2/2003 - The employees of M/s. MAA Logistics have maintained that the invoice in question was prepared at the instance of Shri Velu Chandrasekar based on the particulars conveyed to them on phone and based on a format he had faxed earlier to them - The goods covered by the Bill of Entry are therefore liable for confiscation under Section 111(m) of the Act As regards valuation of NIKKALITE brand Retro Reflective Sheet the authorities relied on a quotation issued by the manufacturer M/s. Nippon Carbide Industries Co., Japan for shipment to Singapore - Even though the assesee/appellant furnished particulars of similar goods imported from several countries no particulars were furnished in respect of import of identical or similar goods - Duty due towards goods cleared under the B/E has to be re-quantified as regards the NIKKALITE brand Retro Reflective Sheet Regarding confiscation - There is no evidence except the retracted admission that goods were not adhesive paper but NIKKALITE brand Retro Reflective Sheets - There is also no reliable evidence that the invoice covering this import was fabricated - Decided in the favour of the assessee Once the department proves that something illegal had been done by the manufacturer which prima facie shows that illegal activities were being carried, the burden would shift to the manufacturer - if the department proves that the trucks crossed the barriers carrying some cylinders for which no record was maintained in the factory nor any excise duty was paid then the presumption can be drawn that the trucks were carrying cylinders as per the capacity of the trucks - It is a basic common sense that no person will maintain authentic records of the illegal activities or manufacture being done by it - the appeals are disposed of by way of remand

Issues Involved:
1. Re-classification of imported goods.
2. Allegations of undervaluation and mis-declaration.
3. Demand for differential duty and interest.
4. Penal action under Section 112 of the Customs Act, 1962.
5. Confiscation of goods under Section 111 of the Customs Act, 1962.
6. Validity of statements recorded under Section 108 of the Customs Act.
7. Admissibility of evidence and valuation methods.
8. Imposition of penalties.

Detailed Analysis:

1. Re-classification of Imported Goods:
The key issue was the classification of NIKKALITE brand Retro Reflective Sheet, which was declared as self-adhesive paper under Tariff heading 4823.12. The authorities re-classified these goods under Tariff heading 3920.99 after chemical tests confirmed that the goods were articles of plastic (Polyurethane type) manufactured by M/s. Nippon Carbide Industries Co., Japan.

2. Allegations of Undervaluation and Mis-declaration:
The authorities alleged that the imported goods, including window films and NIKKALITE brand Retro Reflective Sheet, were undervalued and mis-declared with the intention to evade customs duty. Statements from Shri Velu Chandrasekar and other witnesses corroborated these allegations. The investigation revealed that the invoice filed with the Bill of Entry was fabricated and the actual quantities imported were in excess of those declared.

3. Demand for Differential Duty and Interest:
The authorities demanded differential duty on the goods based on the re-determined value. The Adjudicating Authority used Rule 8 of the Customs Valuation (Determination of Prices of Imported Goods) Rules, 1988, to ascertain the actual value of the imported goods. The value of NIKKALITE brand Retro Reflective Sheet was re-determined based on a proforma invoice from the manufacturer, although the Tribunal found merit in the appellant's argument that value should not be based solely on a proforma invoice.

4. Penal Action under Section 112 of the Customs Act, 1962:
The authorities imposed penalties on M/s. Velpa Technologies and Shri Velu Chandrasekar under Section 112 of the Customs Act, 1962, for their involvement in the mis-declaration and undervaluation of imported goods. The Tribunal upheld the penalties but remanded the case for re-quantification of duty and penalties.

5. Confiscation of Goods under Section 111 of the Customs Act, 1962:
The goods were found liable for confiscation under Section 111(m) for mis-declaration and under Section 111(f) for mis-declaration in the import manifest. The Tribunal upheld the confiscation of goods covered by the Airway bill as the description was mis-declared in the manifest.

6. Validity of Statements Recorded under Section 108 of the Customs Act:
The appellants argued that the statements were obtained under coercion and were not independently corroborated. The Tribunal found no material to support the claim of coercion and noted that the statements were not retracted until the show-cause notice was issued. The corroborative evidence gathered by the Department rendered these statements reliable.

7. Admissibility of Evidence and Valuation Methods:
The Tribunal found that the authorities had followed the procedure to determine the value under the residual method of Rule 8 of the Customs Valuation Rules. However, it accepted the appellant's claim that the price of SGD 160 per roll should be preferred over SGD 192 for NIKKALITE brand Retro Reflective Sheet, as admitted by Shri Velu Chandrasekar. The Tribunal also found that there was no evidence to support the mis-declaration and undervaluation for past imports covered by certain Bills of Entry.

8. Imposition of Penalties:
The Tribunal upheld the imposition of penalties under Section 112(a) of the Customs Act but remanded the case for re-quantification of the duty liability and penal liability of the assessee and Shri Velu Chandrasekar. The Tribunal distinguished the cited case laws based on facts and supported the findings with observations from a relevant High Court decision.

Conclusion:
The appeals were disposed of by way of remand for re-quantification of duty and penalties, with a directive to allow the parties adequate opportunity to present their case before a fresh decision is taken by the original authority.

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